FEDERAL COURT OF AUSTRALIA

Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2025] FCAFC 1

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant is to pay the respondent’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC AND ABRAHAM JJ:

1    This is an appeal from an order made on 1 March 2024 that the appellant, Ultra Tune Australia Pty Ltd, pay fines in the total sum of $1.5 million (Order 6) following its conviction on four charges of contempt pleaded in the amended statement of charge filed on 29 August 2022 in the proceeding below: see Australian Competition and Consumer Commission v Ultra Tune Australia Pty Ltd (No 3) [2024] FCA 156 (J).

2    It is convenient first to set out the history of the proceeding and the circumstances which led to the making of the order the subject of this appeal.

3    The respondent, the Australian Competition and Consumer Commission (ACCC), commenced a proceeding against Ultra Tune seeking pecuniary penalties for its breaches of the Franchising Code of Conduct which is Sch 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) and of s 29 of the Australian Consumer Law (ACL), which is Sch 2 to the Competition and Consumer Act 2010 (Cth) and declarations, injunctions and publication and compliance orders as well as relief by way of refund for the prospective franchisee who brought the complaint which led to the ACCC’s investigation and the proceeding below: J[3].

4    On 18 January 2019 the primary judge published his reasons and made the following orders as recorded at J[5]:

1.    The respondent pay to the applicant a pecuniary penalty of $2,604,000 [reduced on appeal to $2,014,000] within 60 days of this judgment.

2.    The respondent pay to the applicant $33,000 plus interest within 14 days for the redress of Mr Nakash Ahmed.

3.    The applicant pay the sum referred to in order 2 to Mr Nakash Ahmed within 14 days of receipt of the sum from the respondent.

4.    The respondent pay the applicant’s costs on an indemnity basis.

5.    The parties furnish agreed or competing draft orders and declarations to reflect these reasons within 28 days.

5    The parties provided agreed draft orders to the primary judge and on 4 March 2019 the Court made declarations and orders (March 2019 Orders) including:

(1)    declarations that:

[2]    Ultra Tune Australia failed to:

(a)    prepare the financial year (FY) 2014-15 marketing fund statement (MFS) for each of the five geographical regions in which Ultra Tune Australia operates, namely NSW Metro, NSW Regional (including ACT), QLD, VIC and WA (UTA Regions) within four months of 30 June 2015;

…

[4]    Ultra Tune Australia failed to update its disclosure document for FY 2015-16 within four months after 30 June 2015 and thereby contravened clause 8(6) of the Franchising Code and section 51ACB of the CCA.

(2)    orders in the nature of compliance orders requiring that:

[2]    Ultra Tune Australia, for a period of three years from the date of this order, whether by itself, its servants or agents, be restrained from contravening clauses 8(6), 15(1) and 16(1) of the Franchising Code.

…

[6]    Ultra Tune Australia establish, administer and comply with a program at its own expense, which has the purpose of ensuring compliance by Ultra Tune Australia’s employees and agents with the Franchising Code, the CCA and the ACL, and particularly clauses 6(1), 8(6), 9(1) and 15(1) of the Franchising Code and sections 18 and 29(1) of the ACL, in the form of Annexure B to this Order.

6    Ultra Tune appealed from the March 2019 Orders. As summarised at J[8]-[9] the “key successful ground of appeal … involved, …., a ‘narrow question of construction’” concerning cl 15 of the Franchising Code and “[t]he overall seriousness of the contraventions was also affected by Ultra Tune’s state of mind in relation to the contraventions arising from an unsuccessful appeal ground concerning the content aspect of the disclosures that were made. The Full Court found that while there was no error in finding these contraventions had been proven, … , the insufficiency of detail was found by the Full Court to be due to egregious inadvertence by Ultra Tune, rather than a stubborn approach to compliance … as had been found in the primary judgment”.

7    These findings by the Full Court affected the assessment of overall seriousness, resulting in the reduction of the penalty ordered to be paid by $590,000 from $2,604,000 to $2,014,000 (reflected at [4] above).

8    Ultra Tune failed to comply with the compliance orders set out at [5(2)] above. The ACCC brought an application for contempt of Court. On 1 June 2023 the ACCC filed an amended interlocutory application in which it sought declarations that Ultra Tune is guilty of contempt of Court for:

(1)    breaching Order 2 of the March 2019 Orders by:

(a)    failing to update its disclosure document within four months after the end of the 2019-2020 financial year, thereby contravening cl 8(6) of the Franchising Code;

(b)    failing to prepare an annual financial statement detailing all of the Ultra Tune marketing fund’s receipts and expenses for the 2018-2019 financial year within four months after the end of that financial year, thereby contravening cl 15(1) of the Franchising Code; and

(c)    failing to prepare an annual financial statement detailing all of the Ultra Tune marketing fund’s receipts and expenses for the 2019-2020 financial year within four months after the end of that financial year, thereby contravening cl 15(1) of the Franchising Code; and

(2)    breaching Order 6 of the March 2019 Orders by failing to ensure its compliance officer reported to its board and/or senior management on a quarterly basis on the continuing effectiveness of its compliance program between April 2021 and December 2021 as required by para 15 of Annexure B to the March 2019 Orders.

An amended statement of charge had been filed earlier.

9    The ACCC sought an order pursuant to s 31 of the Federal Court of Australia Act 1976 (Cth) imposing such punishment for the contempt as the Court considered appropriate.

10    The amended statement of charge recorded the charges as follows (omitting particulars):

Charge 1

1.    You breached order 2 of orders made by this Court on 4 March 2019 in this proceeding NSD 750 of 2017 (Orders) by contravening clause 8(6) of the Franchising Code of Conduct (Franchising Code), which is Schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014, in not updating the disclosure document following the financial year ending 30 June 2020 until 10 November 2020, being 10 days after it was required to be updated.

Charge 2

2.    You breached order 2 of the Orders by contravening clause 15(1) of the Franchising Code in not preparing an annual financial statement detailing all of the Ultra Tune marketing fund’s expenses for the financial year ending 30 June 2019 until 17 December 2019, being 7 weeks after it was required to be prepared.

Charge 3

3.    You breached order 2 of the Orders by contravening clause 15(1) of the Franchising Code in not preparing an MFS for the financial year ending 30 June 2020 until 28 June 2021, being approximately 8 months after it was required to be prepared.

Charge 4

4.    You breached order 6 of the Orders by failing to comply with a Compliance Program in the form of Annexure B to the Orders in that you did not ensure that your Compliance Officer reported to your Board and/or senior management on the continuing effectiveness of the Compliance Program in respect of the following quarterly periods:

a.    April to June 2021;

b.    July to September 2021; and

c.    October to December 2021.

11    Ultra Tune pleaded guilty to the four contempt charges: J[11].

12    On 1 March 2024, following an earlier hearing of the ACCC’s amended interlocutory application, the primary judge made declarations and orders including Order 6.

THE RELEVANT COURT RULES

13    Given their relevance to the reasoning of the primary judge and grounds 1 and 2 of this appeal, it is convenient to set out rr 41.06 – 41.08 of the Federal Court Rules 2011 (Cth). Those rules are found in Div 41.1 of Pt 41 in Ch 5 of the Rules.

14    Rule 41.06 titled “Endorsement on order” provides:

If an order requires a person to do, or not to do, an act or thing, whether within a certain time or not, and the consequences of failing to comply with the order may be committal, sequestration or punishment for contempt, the order must carry an endorsement that the person to be served with the order will be liable to imprisonment, sequestration of property or punishment for contempt if:

(a)    for an order that requires the person to do an act or thing—the person neglects or refuses to do the act or thing within the time specified in the order; or

(b)    for an order that requires the person not to do an act or thing—the person disobeys the order.

15    Rules 41.07 and 41.08 of the Rules provide:

41.07 Service of order

(1)    An order mentioned in rule 41.06 must be served personally on the person who is bound to do, or not to do, the act or thing:

(a)    within the time mentioned in the order; or

(b)    if no time is mentioned—within a time that would allow the person to comply with the order.

(2)    However, if the person:

(a)    was present when the judgment was pronounced or the order was made; or

(b)    was notified of the terms of the order orally, by telephone or electronically;

the person is taken to have been served with the order at the time the person heard or was notified of the order.

41.08 Application where person fails to comply with order

(1)    If a person fails to comply with an order that the person is bound to comply with a party may apply to the Court for the following orders:

(a)    the committal of the person;

(b)    the sequestration of the person’s property.

(2)    If the person in default is a corporation or an organisation, a party may apply to the Court for an order:

(a)    for the committal of an officer of the corporation or organisation; or

(b)    for the sequestration of the property of the corporation or organisation.

(3)    However, no application may be made for an order under paragraph (2)(a) unless the officer:

(a)    has been served with the order in accordance with rule 41.07(1), and the order carries the endorsement in rule 41.06; or

(b)    was present when the order was made or was notified of the order in accordance with rule 41.07(2).

(4)    This rule applies if the Court has made:

(a)    an injunction; or

(b)    an order in the nature of an injunction; or

(c)    an order in the nature of mandamus or prohibition.

Note: Contempt is dealt with in Part 42.

16    Part 42 of the Rules sets out the procedures to be followed where a party alleges that a person is guilty of contempt of court.

17    Rule 1.34 of the Rules permits the Court to dispense with compliance with any of the Rules, either before or after the occasion for compliance arises.

18    Also relevant is O 37 r 2 of the Federal Court Rules 1979 (Cth) (former Rules). It provides:

Service before committal or sequestration

(1)    Subject to the Rules, an order shall not be enforced by committal or sequestration unless:

(a)    the order or a certified or office copy thereof is served personally on the person bound; and

(b)    if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.

(2)    Subject to the Rules, where the person bound by an order is a corporation or organisation the order shall not be enforced by committal of an officer of the person bound or by sequestration of the property of an officer of the person bound unless, in addition to service under sub-rule (1) on the person bound:

(a)    the order or a certified or office copy thereof is served personally on the officer; and

(b)    if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.

(3)    An order or a certified or office copy thereof served under this rule must bear a notice (naming the persons concerned) that the person served is liable to imprisonment or to sequestration of property if:

(a)    where the order requires the person bound to do an act within a specified time, the person bound refuses or neglects to do the act within that time; or

(b)    where the order requires the person bound to abstain from doing an act, the person bound disobeys the order.

(4)    Subject to the Rules, where:

(a)    an order requires the person bound to do an act; and

(b)    another order specifies the time in which the act is required to be done;

each order or a certified or office copy thereof shall be served on the person bound before the expiry of that time as so abridged or extended.

(5)    Where a person liable to committal or sequestration of his property by way of enforcement of a judgment or order has notice of the judgment or order:

(a)    by being present when the judgment is pronounced or when the order is made; or

(b)    by being notified of the terms of the judgment or order whether by telephone, telegram or otherwise;

the judgment or order may be enforced by committal of that person or by sequestration of his property notwithstanding that service has not been effected in accordance with this rule.

(6)    The Court may dispense with service under this rule.

THE PRIMARY JUDGE’S REASONS

19    There were essentially two issues for resolution by the primary judge.

20    First, Ultra Tune contended that the lack of inclusion of an endorsement to the March 2019 Orders as required by r 41.06 of the Rules meant that the Court could not impose a penalty on Ultra Tune for its contempts. Ultra Tune said that this meant that it could not be punished for contempt, and that the Court should not exercise the power in r 1.34 of the Rules to dispense with compliance with r 41.06 to allow any punishment to be imposed. Ultra Tune submitted that the only remedy available for its admitted deliberate (but not contumacious or defiant) failure to obey the relevant compliance orders are declarations: J[32].

21    The primary judge rejected Ultra Tune’s contentions.

22    His Honour set out the relevant Rules and their predecessors in O 37 r 2 of the former Rules, noting the differences between them. The primary judge referred to the endorsement described in r 41.06 of the Rules as the warning endorsement and the notice described in O 37 r 2(3) of the former Rules as the warning notice. For ease, we will adopt the same terms. After summarising the scheme of O 37 r 2 the primary judge said at J[38]:

A number of judgments during the currency of the former Rules dealing with O 37 r 2 need to be read with the full terms of that rule as set out above, to avoid potentially being misled into thinking that the requirement for the warning notice as to the liability for imprisonment, or sequestration of property, for non-compliance with an order of the Court arose from O 37 r 2(3) alone, even though that subrule set out the terms of the warning notice. Rather, the requirement arose from the combined effect of the requirement for personal service of the order (under r 2(1) or the combination of r 2(1) and r 2(2)), and the requirement that the order so served contained the warning notice (r 2(3)). That is important in this case, because there is no relevant provision in the Federal Court Rules accompanying r 41.06, akin to O 37 r 2(1) or (2) accompanying O 37 r 2(3), with the accompanying provision that does exist, r 41.08(3), not extending to anyone other than an officer of an organisation or corporation bound by the order of the Court.

And at J[40]:

Reading O 37 r 2 as a coherent scheme, the requirement for service of the order with the warning notice was evidently and logically designed for a circumstance in which it is likely that the first that the person being served knew about the existence of the order, and therefore of the requirements that had been imposed upon them, was when the order was served. In that way, when the order was served, the person bound by it was to be made aware explicitly by the warning notice as to the consequences of non-compliance. The evident primary purpose of serving a copy of the order with the warning notice was to secure compliance in the first place, because such service must take place before the expiry of the time for compliance and therefore before a contempt for not doing an act has been committed (noting that an injunction restraining conduct may be immediate, but taking effect upon service of the order).

23    At J[43] the primary judge observed that the text of O 37 r 2 of the former Rules is of assistance in interpreting rr 41.06 to 41.08 “as a coherent scheme in that historical context”. At J[44] his Honour noted that the language in O 37 r 2(1) and (2) that an “order shall not be enforced” by committal or sequestration without service of the order was not maintained in Div 41.1 of the Rules and that this must be taken as a deliberate decision not to retain that restriction on enforcement. At J[45] his Honour said in relation to r 41.07 and r 41.08:

..., the current r 41.08(3) does not permit an application for an order for committal (that is, imprisonment) to be made under r 41.08(2)(a) in relation to an officer of a corporation or an organisation bound by an order of the Court unless either that order has been served in accordance with r 41.07(1) and carries the warning endorsement, or that officer was present when the order was made or was notified in accordance with r 41.07(2). It makes better sense to preclude an application being made than to allow it to be made, but for it to be a doomed enterprise because the relief sought cannot be granted without dispensation from the application of that subrule.

24    The primary judge also said at J[48]:

A warning endorsement is expressly only indispensable to enforcement action being taken by the terms of r 41.08(3) if the officer of a company or organisation bound by the order was not present when the order was made and was not notified of it having been made (noting that being present for the pronouncement of the judgment will not suffice). That is a lesser restriction than under the former O 37 r 2(3), because it does not restrict bringing an application for sequestration. Moreover, no restriction is imposed in bringing an application for either committal (that is, imprisonment) or sequestration of property of a natural person bound by an order under r 41.08(1)(a) or (b) respectively because of the absence of an endorsement warning.

25    The primary judge was unable to accept Ultra Tune’s submission that “the absence of a barrier to making an application, means that while an application for that relief is not precluded, the relief sought nonetheless cannot be granted”. His Honour opined that the Rules “cannot sensibly be read as permitting an application to be made seeking an order that a natural person bound by an order be imprisoned or have their property sequestered as a means of compelling compliance, yet not allow that application to be heard and determined, and that remedy granted, without dispensing with the requirements of r 41.06”: J[49].

26    The primary judge turned to the relevant facts. His Honour found that the evidence made it clear that Ultra Tune was on notice that the compliance orders had been made given that it had been involved in their drafting, consented to them being made and was provided with a copy. His Honour continued at J[50]:

It is difficult to see how rr 41.07(2) and 41.08(1) rationally could have allowed for an application brought for the sequestration of Ultra Tune’s property, or for the imprisonment or sequestration of the property of one of its officers, without an order even being served upon the basis only of failing to comply with the order, yet produce the result that Ultra Tune is immune from punishment for contempts of court clearly able to be proven beyond reasonable doubt (and as resulted, admitted to) because of the absence of the r 41.06 warning endorsement on orders that it had consented to.

27    The primary judge adhered to the views he had expressed in Mensink v Parbery (2018) 264 FCR 265 at [192]-[204] and [207] noting that the reasoning there served to bolster the conclusion he had reached that the absence of the endorsement warning required by r 41.06 of the Rules was not fatal to contempt proceedings generally and was certainly not fatal in the case of Ultra Tune due to its involvement in the making of the compliance orders with which it later did not comply: J[52].

28    At J[56] the primary judge said:

The policy objective standing behind the requirement in r 41.06 has been amply met. It would be a travesty not to exercise the discretion to dispense with that requirement, if, contrary to my primary conclusion, that is needed. This explains the order I make to that effect. The alternative, if dispensation was needed, would be for Ultra Tune to get away with the four serious and admitted contempts that have taken place.

29    Secondly, having resolved that issue, the primary judge considered the evidence before him for the purposes of determining the appropriate penalty. At the outset his Honour noted that the parties disagreed about the characterisation of Ultra Tune’s commitment and attitude to compliance, and about what the evidence before the Court demonstrated about the seriousness and characterisation of the contempts. Ultra Tune submitted that the contempts, while wilful, were reflective of “unfortunate circumstances” and “incompetence” while the ACCC submitted that the “evidence demonstrates that [Ultra Tune] adopted a cavalier attitude to compliance”. Because of the disagreement, the primary judge set out a detailed chronology of the events leading up to and occasioning the four contempts.

30    In considering the facts and related submissions in relation to charge 1 the primary judge accepted Ultra Tune’s submission that “the delay in distributing the 2019/2020 financial year disclosure document ‘arose from a breakdown in communications and a failure to adequately foresee and deal with circumstances that had not previously arisen’”: J[70]. More generally, his Honour found, based on the evidence, that the contempts charged were not out of character for Ultra Tune and that they reflected its corporate character which “was insufficiently concerned with, and with effecting, compliance, even when it came to Court orders”. His Honour noted that while Ultra Tune had not committed subsequent breaches of the Franchising Code there remained a strong need for specific deterrence: J[179].

31    The primary judge then considered the penalty to be imposed. At J[181] his Honour said:

The most useful yardstick guide to penalty is not to be found in comparative cases, for which the facts and history necessarily differs so greatly as to provide only a weak yardstick: see Hili v The Queen [2010] HCA 45; 242 CLR 520 at [48], cited in Kazal at [114]. Greater value is to be found in the conclusions reached in the primary judgment that were either endorsed, or not affected by, the Full Court decision and more particularly by the conclusions reached by the Full Court, especially as their Honours re-imposed key parts of the penalty on Ultra Tune.

32    The primary judge adopted that approach in assessing penalty.

33    In relation to charge 1, which related to the failure by Ultra Tune to maintain the four separate disclosure documents for the four regions in which it conducts its business by updating each of them within four months of the end of the financial year ended 30 June 2020, the primary judge observed that the original penalty he had imposed was $50,000 for each document, a total of $200,000 out of a possible maximum of $216,000 ($54,000 for each contravention based on 300 penalty units and a penalty unit being $180 in 2015). That penalty was reduced by the Full Court to $130,000, being about 60% of the maximum.

34    The value of a penalty unit, which is indexed and increases, had since increased. His Honour noted “as relevant as a comparator for the contempt charges” that it had increased to $210 on 1 July 2018 and to $222 on 1 July 2020, making it respectively $63,000 and $66,300 for 300 penalty units: J[182].

35    At J[184]-[185] his Honour said in relation to charge 1:

184    That said, the delay relevant to charge 1 was 10 days rather than four months. But that 10 days must be considered in the context of Ultra Tune being given four months after the end of the financial year to update the disclosure document, the protective purpose of the obligation, the prior findings of contravention and the upholding of those findings except in respect as to state of mind that does not apply to this kind of contravention and thus to the first contempt charge.

185    Balancing the competing considerations, had the delay been as long as the original contravention of cl 8(6), a penalty substantially greater than originally imposed would have been within reasonable contemplation. Balancing the shorter delay against the continued failure to comply in the face of the primary decision and the Full Court decision, the appropriate civil penalty had this been a bare breach of the Franchising Code would have been approximately that imposed by the Full Court of around about 60% of the maximum, now measured from 1 July 2020, of $265,200, or in round terms, $160,000.

36    In relation to charge 2, which related to the preparation of the annual financial statement detailing all of Ultra Tune’s marketing fund expenses for the financial year ending 30 June 2019, which did not take place until 17 December 2019, seven weeks late, the primary judge observed that was “well on the way to defeating the purpose standing behind the requirement to provide the necessary information within a timeframe that will be useful for franchisees and make Ultra Tune to that extent accountable”: J[188].

37    As to charge 3, which, as described by the primary judge, related “to an even worse performance for the 2019-2020 financial year, which was not prepared until 28 June 2021, not just eight months late, but taking three-times longer than required”, his Honour observed this to be “not a lot better than a decision not to comply at all because none of the statutory objectives are met, as by then it was more of a historical record than anything bearing any real resemblance to compliance”: J[188].

38    His Honour observed (at J[189]) that the prior penalties clearly had not had the necessary deterrent effect and an appropriate sanction was required, even accepting that Ultra Tune was then seemingly taking its obligations seriously. His Honour said that “[t]here must be real deterrence, both specific and general” and that “[th]is Court cannot be seen to be ineffectual in relation to seeking compliance with its orders, especially in relation to a major franchisor continuing to fail to meet its obligations”. At J[190] the primary judge said that the penalty for charges 2 and 3 needed to be “somewhat greater” than imposed by the Full Court for the 2014-2015 financial year allowing for the increase in maximum penalties since then and “considerably greater” than imposed by the Full Court for the 2015-2016 financial year for contraventions that equate to those charges because Ultra Tune should be “appropriately sanctioned” and “not be tempted to let things slip again in the future” and “other franchisors must be encouraged to take their legal obligations seriously and consider that it is in their best interests to comply”. In all the circumstances the primary judge said that the appropriate penalties “had the subject of those charges been proven to be contraventions of the Franchising Code of the same kind” were for charge 2, $200,000 and for charge 3, $400,000.

39    The primary judge rejected Ultra Tune’s submission that the Court should not have regard to the penalties that could have been imposed had the conduct the subject of the contempt charges instead been made the subject of a fresh civil penalty contravention proceeding for the breaches of the Franchising Code the subject of charges 1, 2 and 3. His Honour said that “the availability of other sanctions for the same conduct, and the potential scale of those alternative sanctions, especially when the alternative can be seen to be less serious, forms part of the matrix of relevant facts and circumstances to which regard may be had in arriving at an appropriate penalty for the present contempt conduct”: J[191]. The primary judge continued at J[192]:

Ordinarily, all things otherwise being equal, conduct in defiance of court orders will be more serious than the same conduct in defiance of obligations imposed by statute, and can readily be seen to be more serious, because of the overt and preventative nature of orders made by the Court. Civil penalties and contempt penalties have in common the purpose of deterrence, but the contempt proceedings involving disobedience of court orders have the additional dimension of the need to uphold and reinforce the efficacy of the administration of justice: see Kazal at [97]. In a case such as this involving wilful non-compliance of court orders, although not contumacious, that circumstance calls for a more severe deterrent response. It is a legitimate response to impose a penalty for conduct that amounts to contempt that is greater than would be appropriate for the same conduct that amounts to no more than a civil penalty contravention. Such an increased sanction reflects not just the fact that statutory prevention penalties can legitimately be seen as something in the nature of a yardstick for a contempt sanction when the conduct for each is substantially the same (see Hili v The Queen [2010] HCA 45; 242 CLR 520 at [54]), but also because the maximum penalty for a civil penalty contravention for the same or substantially the same conduct is no more than a useful guide and cannot be a fetter on discretion. If that were not so, at least in a suitable case such as the present, the contempt sanction is at risk of losing the necessary additional deterrent sting.

40    The primary judge was of the view that the further contravention by way of disobedience with a compliance order was to be treated more seriously than a bare contravention of the relevant clause of the Franchising Code and that the penalty must be lifted where actions that would be a contravention of the law also amount to a contempt of a court order. His Honour said that “[t]he penalty imposed on a contemnor must necessarily leave the contemnor worse off in an instance where they have breached a Court order requiring their compliance with a legal obligation, than they would have been had they failed to comply with that same legal obligation without being court ordered to do so and were merely the subject of successful civil penalty proceedings”: J[193].

41    In the circumstances the primary judge was of the view that an increase in the penalty over that which would be appropriate for corresponding civil penalty contravention of 50% was warranted for charges 1 to 3 and thus imposed an overall penalty of $240,000 for charge 1, $300,000 for charge 2 and $600,000 for charge 3: J[194].

42    As for charge 4, the primary judge considered that to be in the nature of a pure contempt, that is a breach of a court order not predicated on a breach of a legislative requirement. His Honour considered that “charge 4 is a little more serious than charge 2, but much less serious than charge 3” and that “the appropriate penalty must be in between that given for those two charges, but closer to charge 2”. His Honour considered that the appropriate penalty for charge 4 to be $360,000: J[195].

THE NOTICE OF APPEAL

43    Ultra Tune’s notice of appeal raises eight grounds of appeal: grounds 1 and 2 concern the primary judge’s findings about the Court’s power to impose a punishment for contempt in circumstances where no endorsement is included on the relevant orders; and grounds 3 to 8 concern the primary judge’s findings in relation to the calculation of the penalties for contempt.

Grounds 1 and 2

44    Ground 1 of the notice of appeal challenges the primary judge’s finding that Ultra Tune could be liable for punishment for contempt in circumstances where the March 2019 Orders did not include an endorsement that the person to be served with the order will be liable to punishment for contempt if the person neglects or refuses to do the act or thing within the time specified in the order.

45    Ultra Tune submits that for enforcement of contempt to occur by way of committal, sequestration or punishment, by reason of a failure to comply with a court order, the order must be endorsed under r 41.06 of the Rules. It contends that as the ACCC failed to have the warning endorsement included on the March 2019 Orders, the effect of the Rules in Div 41.1 is that the Court would not impose a punishment on it for contempt of those orders.

46    Ultra Tune contends that the primary judge’s conclusion that a failure to comply with the endorsement requirements in r 41.06 did not preclude the Court from imposing a punishment for contempt arising from a failure to comply with the March 2019 Orders was based on two foundations: first, that the express terms in rr 41.06-41.08, unlike O 37 r 2 of the former Rules, did not preclude punishment; and secondly, an inference from the terms of r 41.08.

47    As to the first basis, Ultra Tune submits that the primary judge’s approach of distinguishing rr 41.06-41.08 from O 37 r 2 of the former Rules is not supported by the terms of the Rules. It says that each of rr 41.06-41.08 requires that the order be endorsed for the relevant consequence to follow. Ultra Tune contends that r 41.07(1) does not affect the endorsement obligation in r 41.06 but rather embraces it given that the latter commences with the phrase “[a]n order mentioned in r 41.06”, being an endorsed order.

48    Ultra Tune submits that the earlier authorities relied on by the primary judge which considered O 37 r 2, Re Modern Woodcraft Pty Ltd (In Liquidation) (1997) 75 FCR 245 and Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129, lend support to its position. It contends that the primary judge’s conclusion at J[46]-[47] misapprehends the express limitations in O 37 r 2(5) of the former Rules and r  41.07 of the Rules that the orders of which notice is given complied with the requirement for endorsement and that r 41.07 of the Rules does not create an alternative path to r 41.06.

49    Secondly, Ultra Tune submits that r 41.08 of the Rules makes no express reference to “punishment”, as opposed to sequestration or committal, appears to be an oversight, following the transition from O 37 r 2 to the new regime in Div 41.1 of the Rules. It observes that none of the recent authorities have considered this apparent oversight. Ultra Tune contends that, contrary to the view expressed at J[48], the express limitation in r 41.08(3) could not imply that r 41.06 has no determinative effect and that r 41.08(3) is concerned with a situation in which the committal of an officer of the corporation is sought and so, unsurprisingly, requires the officer to have been served with an endorsed order, unless the officer was present when the order was made.

50    In Director of Consumer Affairs Victoria v Gibson (No 4) [2018] FCA 1868 Mortimer J (as her Honour then was) reviewed the authorities in relation to the operation of r 41.06 as they existed at the time. That case concerned an application by the Director of Consumer of Affairs Victoria to have a warning endorsement placed on orders made against the first respondent, Ms Gibson. Relevantly, the orders made and entered by the Court on 28 September 2017 requiring Ms Gibson to pay the State of Victoria pecuniary penalties totalling $410,000 for contraventions of the Australian Consumer Law and Fair Trading Act 2012 (Vic) did not include the warning endorsement pursuant to r 41.06 of the Rules.

51    At [42]-[44] Mortimer J said:

42    The purpose of an endorsement was described by Greenwood J in Mason v MWREDC Limited [2012] FCA 1083 at [33]-[49]. At [33] his Honour said:

…personal service of the physical authenticated order or a true copy of the authenticated order endorsed under rule 41.06 tells the person bound by the order, in a way that enables the person to reflect upon the content of the order, first, the terms of the Court’s order containing the obligation to do something and, second, one of three possible consequences (committal, that is committal to prison; sequestration of property or punishment for contempt) should the person neglect or refuse to do the relevant thing within the time specified in the order.

43    At [49] his Honour further observes that providing an individual with the “benefit” of having her or his mind focused on the consequences of neglect or failure to comply with an order may later serve a purpose as a “material matter” to be taken into account in the exercise of the Court’s discretion in any application for punishment of a contended contempt. I respectfully agree with his Honour’s description of the purpose of an endorsement.

44    There are some differences in the authorities about whether compliance with the terms of r 41.06 is a necessary precondition to a contempt prosecution, or whether compliance can be waived at the direction of the Court. I deal with this below under “Other authorities”.

52    Commencing at [82] her Honour considered the “other authorities”. They were cases in which the Court had dealt with an exercise of the power of the kind sought from the Court in the proceeding, i.e. to vary the order previously entered to add an endorsement.

53    Her Honour first referred to Titan Support Systems Inc v Nguyen (No 2) [2015] FCA 359 where Murphy J made orders varying orders previously made and entered by adding the warning endorsement because the “[t]he Court should not allow its orders to be disobeyed with impunity as to do so tends to bring the administration of justice into disrepute”. However, in doing so his Honour held that the application before him, which was an application for prosecution for contempt, must fail because the orders relied on did not contain an endorsement.

54    At [86] and [88]-[90] Mortimer J said:

86    Titan was referred to with apparent approval by Flick J in Sydney Medical Service Co-operative Limited v Lakemba Medical Services Pty Ltd (No 2) [2016] FCA 1188. In that case, it would appear that the orders on which the prosecution for contempt proceeded did not initially bear the required endorsement. For that reason, Flick J made the following order:

Pursuant to r 1.34 of the Federal Court Rules 2011 (Cth), compliance with r 41.06 is dispensed with to the extent that the initial service of the Orders did not bear the endorsement as required by r 41.06.

…

88    Other proceedings where an endorsement has been added to orders at a later date, or the requirement for an endorsement has been dispensed with include: Tax Practitioners Board v Lamede Group Proprietary Limited (No 2) [2016] FCA 656 (Dowsett J); Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 1441 (Moshinsky J) and Cooper, in the matter of Chopsonion Pty Ltd (Receivers and Managers Appointed) v Chopsonion Pty Ltd (Receivers and Managers Appointed) [2017] FCA 1207 (Besanko J).

89    The role of the requirement in r 41.06 has been the subject of different analysis by judges of this Court. Again, neither party directed the Court’s attention to any of these cases. The different approaches were summarised by Wigney J in Mensink v Parbery [2018] FCAFC 101 at [86]-[88]:

There would appear to be conflicting authority in respect of that issue. At the very least the position is unclear. Greenwood J in Mason v MWREDC Limited [2012] FCA 1083 at [47] noted that, with the exception of r 41.08(3), neither r 41.07 nor r 41.08 contain any express prohibition in relation to the enforcement of an order by committal, sequestration or punishment for contempt. Rule 41.08(3) is not relevant here because it relates to committal or sequestration orders where the person in default is a corporation or organisation. His Honour also found (at [49]) that notification under r 41.07(2) does not, in terms, require notification of the consequences of non-compliance with the order. His Honour did not, however, appear to decide that an order notified in accordance with r 41.07(2) could be enforced by way of contempt proceedings if the order itself did not include an endorsement in accordance with r 41.06.

In Titan Support Systems Inc v Minh Hoang Nguyen (No 2) [2015] FCA 359, Murphy J agreed generally with what Greenwood J had said in Mason, but clearly held (at [28]) that unless the required endorsement is included in the order served, or otherwise notified in accordance with Division 41.1 of the Federal Court Rules, the order may not be enforced by way of punishment for contempt.

In Humane Society International Inc v Kyodo Senpaku Kaisha Ltd [2015] FCA 1275; (2015) 238 FCR 209, however, Jagot J stated (at [16]) that “[r]ule 41.06 is not a pre-condition to enforcement of an order by punishment for contempt”. Her Honour went on to note that the endorsement requirement in r 41.06 could, if necessary, be dispensed with pursuant to r 1.34 of the Federal Court Rules.

90    Wigney J declined to decide the matter as his Honour considered it was not necessary to do so. Besanko J agreed (at [1]) with Wigney J that the matter did not need to be determined on the appeal before the Court, observing:

The point about the lack of an endorsement requires an analysis of a number of authorities of this Court and may well be the subject of contest later in this proceeding.

55    At [91]-[94] Mortimer J referred to the decision of Bromwich J in Mensink (see below) and at [97] observed that she did not need to enter into the debate about whether compliance with r 41.06 of the Rules is a necessary precondition to a contempt proceeding or to a positive finding of contempt as her Honour’s task related to an anterior issue.

56    The primary judge was a member of the Full Court in Mensink. Relevantly, his Honour made the following obiter observations about the operation of r 41.06 and r 41.07 at [202]-[204]:

202    The submissions for the respondents on this topic should be accepted. The factual and rule differences in the cases identified on behalf of Mr Mensink above go to the application of the relevant principles, rather than to their underlying substance. The submissions for Mr Mensink overstate the effect of Titan Support Systems, which approved of the observations by Greenwood J in Mason v MWREDC and, in particular, did not dispute the effect of r 41.07(2) in effectively dispensing with the endorsement requirement in r 41.06 when notification has taken place in accordance with that subrule. In any event, the absence of the r 41.06 endorsement is only fatal to an application for contempt in the limited situation in which committal to imprisonment of an officer of a corporation or organisation is sought and that person was not present when the order was made: see r 41.08(2)(a) and (3). It will not always be necessary for a charge of contempt to be made out that the precise terms of an order have been communicated, let alone that such an order contains the endorsement, although such service and such an endorsement, or their absence, will always be a matter to take into account. As Jagot J pointed out in Humane Society International at [18]:

The point of requiring service of a court order is to bring matters to the attention of the party in question. It is not the case that a party can avoid having to comply with a court order and thereby can avoid the potential of being found in contempt of court merely by engaging in wilful blindness to the terms of the court order. This is demonstrated by various decisions including Sun Newspapers Pty Ltd v Brisbane TV Ltd (1989) 92 ALR 535, Madeira v Roggette Pty Ltd (No 2) [1992] 1 Qd R 394 and Tchia v Rogerson (1992) 111 FLR 1.

203    In light of the above authority, it may safely be concluded that:

(1)    notification of orders in accordance with the alternative means in r 41.07(2) dispenses with the requirement for a warning in the form of the endorsement stipulated by r 41.06;

(2)    compliance with rules such as rr 41.06 and 41.07 may be dispensed with in appropriate cases;

(3)    the absence of an endorsement in accordance with r 41.06 will not necessarily be fatal to contempt proceedings; and

(4)    if an endorsement in accordance with r 41.06 is absent, that will almost invariably be a factor to take into account in deciding whether contempt charges should issue, whether to make a finding of contempt if charges do issue, and as to the sanction to be imposed if that finding is reached. However, that factor may be diminished in importance, or even become practically irrelevant, depending on the circumstances.

204    To the extent that Titan Support Systems at [28] might be thought to require that an endorsement be made in accordance with r 41.06 in all circumstances other than where notification has been given in accordance with r 41.07(2) before contempt proceedings may be brought, respectfully, it should not be followed. While that endorsement is ordinarily required, and its absence may well be a most compelling reason for not allowing contempt proceedings either to be brought or to succeed, it is going too far to make the presence of the endorsement mandatory in all circumstances. In that regard, it should be observed that r 41.08, which describes how a contempt application is to be brought, does not, in terms, go that far. The absence of an endorsement (and service in accordance with r 41.07(1)) only prevents an application for contempt being made in the limited circumstances described in r 41.08(2)(c) and (3). Implicitly, such an absence is not fatal in other circumstances.

57    Ultra Tune misstates the effect of r 41.06 of the Rules. That rule and r 41.07 and r 41.08 concern enforcing compliance with orders prior to any finding of contempt being sought. The Court’s power to punish for contempt is found in s 31 of the Federal Court Act and the applicable procedural rules are found in Pt 42 of Ch 6 of the Rules. The primary judge recognised this distinction: see J[28]-[29], [31] and [51].

58    As the primary judge found to be the case, the absence of a warning endorsement prevents a party from applying for the committal of an officer of a company or organisation in default of an order pursuant to r 41.08(2) of the Rules unless that officer was present when the order was made or was notified of it pursuant to r 41.07(2).

59    Ultra Tune submits that the primary judge’s approach to distinguishing rr 41.06-41.08 from O 37 r 2 of the former Rules is not supported by the terms of the Rules with each requiring that the order be endorsed for the relevant consequences to follow. We disagree. As the ACCC submits, the primary judge was correct when, having regard to the former scheme found in O 37 r 2, his Honour reasoned that:

(1)    the prohibition on enforcement by imprisonment or sequestration in O 37 r 2 turned on the requirement for personal service if the person was not present when the judgment was pronounced or the order was made, or the person was not notified of the terms of the order: J[39];

(2)    the primary purpose of serving a copy of the order with the warning notice was to secure compliance in the first place: J[40];

(3)    the requirement for the warning notice concerning the liability for imprisonment or sequestration for non-compliance with an order arose from the combined effect of the requirement for personal service (O 37 rr 2(1) and 2(2)) and the requirement for the order so served to contain the warning notice (O 37 r 2(3)). It did not arise from O 37 r 2(3) alone: J[38];

(4)    there is no relevant provision in the Rules akin to O 37 r 2(1) or r 2(2) accompanying r 2(3). The accompanying provision to r 41.06 is r 41.08(3) which does not extend to anyone other than an officer of a corporation or organisation bound by the order: J[38];

(5)    the language in O 37 r 2(1) and (2) that an “order shall not be enforced” by committal or sequestration without service of the order has not been maintained in Div 41.1 of the Rules. Contrary to Ultra Tune’s submission, that is taken to be a deliberate decision and counts against inferring such a restriction in the absence of language that compels it. There is no basis to conclude that the absence of reference to “punishment” in r 41.08 is an oversight on the part of the draftsperson: J[44]; and

(6)    in place of the restriction on enforcement arising from the combined effect of O 37 r 2(1) and (2) of the former Rules, when read with O 37 r 2(3), r 41.08(3) does not permit an application for an order for committal to be made under r 41.08(2)(a) in relation to an officer of a corporation or an organisation bound by an order unless that order has been served in accordance with r 41.07(1) and carries the warning endorsement, the officer was present when the order was made or he or she was notified of the order in accordance with r 41.07(2): J[45].

60    In short, although r 41.06 mandates that an order requiring a person to do or not to do an act or thing must carry a warning endorsement, the absence of an endorsement only precludes an application for the committal of an officer of a company or organisation who was neither present when the order was made nor otherwise notified of the order in the manner required by r 41.07(2) of the Rules.

61    Ultra Tune says that Re Modern and Siminton, each relied on by the primary judge, in fact support its construction of r 41.06.

62    In Re Modern a liquidator sought a finding of contempt arising out of the failure by officers of the company to file affidavits pursuant to s 597A of the (now repealed) Corporations Law about the company’s examinable affairs within the time ordered. Initially the liquidator’s notice of motion sought orders that the officers be found guilty of contempt and committed to imprisonment for disobedience of the Court’s orders. However, by the time of the hearing of his motion the liquidator only sought an order finding the officers guilty of contempt and an order that they pay his costs of the contempt motion on an indemnity basis. The officers submitted that there ought not to be a finding of contempt because the liquidator had not complied with O 37 r 2(3) of the former Rules.

63    At 252G – 253B of Re Modern Lindgren J addressed that submission. His Honour’s view was that O 37 r 2(3) was directed to the situation in which enforcement by imprisonment or sequestration was sought, that it and O 37 r 2(1) are “addressed to the point of time at which the Court is asked to enforce an order by committal or sequestration” and “[t]he expression ‘served under this rule’ in r 2(3) refers to a service which is relied upon for the purpose of the making of such an order”. His Honour was of the view that it remained possible for a contempt of the Court to be committed even though the order served did not bear the warning endorsement. Contrary to Ultra Tune’s submissions, the Court in Re Modern said nothing about “enforcement of the consequences for the contempt” when the relevant order did not bear the warning endorsement. The only question for the Court was whether a finding of contempt could be made.

64    In Siminton the appellant appealed from a declaration that he was guilty of contempt and an order that he be imprisoned and fined. During the course of the hearing of the appeal, a Full Court of this Court (North, Goldberg and Weinberg JJ) was concerned to understand whether the order served on the appellant bore the warning notice required by O 37 r 2. The respondent conceded that the only form of order ever taken out and which could have been served on the appellant did not bear the warning notice. Thus, the question for the Full Court was whether the lack of the notice on the order served on the appellant meant that the primary judge could not make an order for the committal of the appellant. At [67] the Full Court said:

Although the copy of the order of 15 December 2005 served on the appellant did not bear the notice required by O 37, r 2(3), it does not follow that it was not open to Merkel J to find that the appellant had committed the contempts alleged against him. The opening words of O 37, r 1 are clear, namely that “an order shall not be enforced by committal or sequestration” unless, inter alia, it bears the notice required by O 37, r 2(3). The restraint on enforcement does not extend to precluding a finding of contempt otherwise open or the imposition of any fine which has been ordered. It is only committal or sequestration which are precluded. Although a fine might, in any given case, be enforced in default of payment by ordering committal, such an event is not contemplated or referred to in O 37, r 2, and, in any event, there are intermediate steps which have to be undertaken and additional requirements met before that ultimate destination is achieved.

65    True it is that the Full Court in Siminton relied on the opening words of O 37 r 1 in coming to its view but that does not assist Ultra Tune. That is for two reasons. First, the Full Court in Siminton was only concerned with the power to make a finding of contempt. Secondly, the primary judge was of the view that O 37 r 2 of the former Rules was of assistance in interpreting rr 41.06, 41.07 and 41.08 of the Rules but not determinative. His Honour recognised the difference in the language between the O 37 r 2 and rr 41.06-41.08 and took account of that in reaching his views on construction of the latter rules.

66    Ultra Tune has failed to identify any error in the primary judge’s construction of rr 41.06, 41.07 and 41.08 of the Rules, which in our view is correct having regard to the text and scheme of Div 41.1 of the Rules. To the extent it is necessary in reaching this view for us to say so, we respectfully agree with the observation at [204] of Mensink that Titan Support Systems Inc v Nguyen (No 2) [2015] FCA 359 should not be followed to the extent that the Court in that case expressed the view that an endorsement in accordance with r 41.06 was required to be included on the order served in all circumstances except where notification has been given in accordance with r 41.07(2) before the order can be enforced by way of committal, sequestration or punishment for contempt.

67    Ground 2 concerns the primary judge’s exercise of discretion under r 1.34 of the Rules to excuse compliance with r 41.06 of the Rules. As the primary judge recognised, even if his Honour was wrong about his interpretation of rr 41.06, 41.07 and 41,08 of the Rules, r 1.34 enables the Court to excuse compliance with any rule in the Rules, including r 41.06.

68    Ultra Tune submits that the application of the warning endorsement is generally a matter for the party with the benefit of the order. So much can be accepted.

69    Ultra Tune accepts that there is power to dispense with compliance with r 41.06 and that a relevant consideration in the exercise of the discretion to do so is whether there was, in any event, notice of the order given to the person against whom enforcement is sought. However, Ultra Tune submits that the primary judge erred in the exercise of his discretion by failing to take into account that: the ACCC was aware of the requirements in r 41.06 of the Rules, having litigated this very issue previously, but provided no explanation as to why the warning endorsement was not made to the March 2019 Orders; and although Ultra Tune was aware of the March 2019 Orders and the obligations they imposed on it, it was not aware of the consequences of non-compliance and that a fine could be imposed.

70    In finding that he would dispense with the requirement in r 41.06, if necessary, the primary judge was exercising a discretion under r 1.34 of the Rules. Thus, to succeed in this ground, Ultra Tune must demonstrate that the primary judge erred in the way described in House v The King (1936) 55 CLR 499 at 505. That is, Ultra Tune must establish that the primary judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, was mistaken about the facts or failed to take into account a material consideration before his exercise of discretion can be reviewed.

71    That is not the case here. The primary judge was satisfied that Ultra Tune was aware of the terms of the March 2019 Orders: its lawyers participated in their drafting and the draft orders were provided to the Court for entry with its consent; Ultra Tune brought an appeal from parts of the March 2019 Orders; and upon the ACCC expressing its concerns about Ultra Tune’s non-compliance with the March 2019 Orders, Ultra Tune gave an undertaking to comply which it did not honour: J[55]. As the primary judge found to be the case, it follows that Ultra Tune was aware of the terms of the March 2019 Orders and the need to comply with them and had ample opportunity to be made fully aware of the consequences of non-compliance.

72    Ultra Tune now says that it was not aware that a fine may be imposed for non-compliance. Two things can be said about that submission. First, it points to no evidence that it says the primary judge failed to take into account in support of that submission. The primary judge found (at J[55]) that Ultra Tune was aware of its obligations and had extensive opportunity to be made aware of the consequences of non-compliance and that the evidence disclosed that it had concerns about its continuing and protracted failure to comply.

73    Indeed, by letter dated 4 May 2020 (4 May 2020 Letter) Webb Henderson, the ACCC’s solicitors, wrote to Tony Truong, corporate lawyer, Ultra Tune in relation to Ultra Tune’s ongoing non-compliance with the March 2019 Orders and put Ultra Tune on notice that its ongoing non-compliance may lead to the ACCC bringing an application against Ultra Tune for contempt of court. While the letter did not expressly refer to seeking the imposition of a fine if any charges for contempt were made out, it clearly set out the intention to bring an application for contempt in respect of the ongoing conduct. The letter included (emphasis added):

6.    In light of UTA’s ongoing failure to comply with the [March 2019 Orders], the ACCC is considering all available options, including to bring an application against UTA for contempt of court in respect of UTA’s failure to comply with the [March 2019 Orders].

7.    Prior to proceeding with any application for contempt, the ACCC is prepared to provide UTA with a final opportunity to comply with the obligations contained in the [March 2019 Orders]. The ACCC requires UTA to provide the proposed undertaking attached to the Court and the ACCC. The proposed undertaking includes additional prescriptive obligations which are sought to supplement the [March 2019 Orders]. The ACCC considers these additional obligations are appropriate and necessary having regard to UTA’s failure to comply with the [March 2019 Orders] to date.

8.    The ACCC does not intend to engage in correspondence in relation to significant changes to the proposed undertaking. In the event that UTA does not consent to providing the undertaking, the ACCC will consider all further options available to it, including commencing an application for contempt of court against UTA and to seek mandatory injunctions in a similar form to the requirements of the proposed undertaking, and declarations concerning Ultra Tune’s non-compliance with the [March 2019 Orders].

74    Secondly, that Ultra Tune did not know that a particular consequence of non-compliance was the possibility of a fine is not a reason not to exercise the discretion. As the 4 May 2020 Letter demonstrates, Ultra Tune was on notice of the possibility of an application seeking orders that it was in contempt of Court. As the primary judge said, the policy objective of r 41.06 was met because Ultra Tune had ample notice of the March 2019 Orders and the obligations imposed on it by those orders.

75    Similarly, that the primary judge did not take into account the lack of an explanation by the ACCC of why it omitted the warning endorsement from the March 2019 Orders in the exercise of his discretion does not amount to any error which would lead to appellate intervention. While that might be a relevant factor to take into account in the balancing exercise, his Honour was unsurprisingly focussed on whether the purpose of r 41.06 had been met and considered the exercise of his discretion having regard to the facts which went to that question.

76    Grounds 1 and 2 are not made out.

Grounds 3 and 4

77    By ground 3 Ultra Tune contends that in determining the penalties for charges 1 to 3 (which concerned non-compliance with Order 2 of the March 2019 Orders) the primary judge erred by having regard to the penalties that could have been imposed by the Court had it been successfully prosecuted for breaches of the Franchising Code in respect of the same conduct. This ground focuses on J[191]-[193] (see [39]-[40] above).

78    Ultra Tune submits that the cardinal feature of the power to punish a contemnor for contempt is to protect the due administration of justice and, in contrast, the purpose of the Franchising Code is to regulate the conduct between participants in franchising, with the purpose of the penalties prescribed by the Franchising Code being to encourage compliance with it. Accordingly, Ultra Tune contends that in fixing a penalty for contempt the Court should only take account of other findings of contempt and should treat as irrelevant the existence of prior convictions of any other kind. It submits that similarly it should be impermissible for the Court to consider the penalties that might have been available had it been prosecuted for breaches of the Franchising Code.

79    In short Ultra Tune submits that proceedings for contravention of the Franchising Code and proceedings for contempt have different policy objectives such that penalties imposed for the former are irrelevant to the determination of the appropriate sanction for the latter.

80    In Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at [9] a majority of the High Court (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) held that the purpose of a civil penalty under the regime provided by the Fair Work Act 2009 (Cth) is “primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act”. That is a statement of principle that extends beyond the Act in issue in Pattinson.

81    Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375 concerned the question of whether the appellant was amenable to an order under r 29.07(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) to give discovery of particular documents in a proceeding brought to punish it for contempt of court. In the course of considering that question, a plurality of the High Court (French CJ, Kiefel, Bell, Gageler and Keane JJ) observed (at [41]) by reference to the reasons of Hayne J in Re Colina; Ex parte Torney (1999) 200 CLR 386 at [112] that “the cardinal feature of the power to punish for contempt” is that it “is an exercise of judicial power by the courts, to protect the due administration of justice”.

82    In Kazal v Thunder Studios Inc (California) (2016) 256 FCR 90 a Full Court of this Court (Besanko, Wigney and Bromwich JJ) referred (at [97]) to Boral at [41] and then continued:

... Viewed in that way, contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. Contempt proceedings are therefore to be viewed as essential in facilitating courts being able to function properly. That includes being, and being seen to be, effectual in adjudicating upon and resolving disputes, and in particular making orders that will ordinarily be obeyed. This means that individual contempt cases have an importance transcending the instant case by supporting and enhancing the integrity of judicial proceedings, both in respect of orders made, and more generally. That view of contempt proceedings can be seen to permeate longstanding sentencing authority in this area.

83    That said, deterrence has been acknowledged as an aspect of achieving the stated purpose of the protection of the administration of justice. In Witham v Holloway (1995) 183 CLR 525 McHugh J considered the rationale for the distinction between civil and criminal contempt. In doing so his Honour observed at 539:

The traditional rationale for the distinction between civil and criminal contempt has been that civil contempts affect only the parties to the proceedings while criminal contempts affect the community. Proceedings for civil contempt have been seen as essentially or, at all events primarily, coercive, brought to compel the contemnor to comply with an order or judgment of a court; proceedings for criminal contempt, on the other hand, have been seen as punitive and deterrent, brought to uphold the public interest in the efficient administration and continuing authority of the institutions of justice. Thus. the object of the action for civil contempt has been seen as the protection of the rights of the successful party while the object of the action for criminal contempt has been seen as the protection of the community.

However, it is difficult to accept the claim that the disobedience of a court order is a matter that concerns only the parties to the action. An order by way of fine, committal or sequestration of property for disobeying a court order cannot be regarded as a matter that concerns only the parties to the action. The fine, committal or sequestration vindicates the authority of the court and deters other suitors from disobeying the orders of the courts. …

    (Footnotes omitted.)

84    The Full Court in Kazal also referred to the distinction between civil and criminal contempt, relevantly observing at [23] (our emphasis):

This distinction between civil and criminal contempt was not regarded as being satisfactory in Witham, having regard to such considerations as disobedience not being able to be remedied in all cases, and there being in any event a public interest in court orders being obeyed. There was no easy or bright line between remedial or coercive objectives and punitive objectives. It may be in the public interest for contempt proceedings to continue, even if the opposing parties do not seek it. Nothing was achieved by describing some proceedings as punitive and others remedial or coercive, given that punishment is still punishment whatever the motive for imposing it: see Witham at 533-534. Although not forming part of the reasoning in Witham, it may be seen that for both kinds of contempt, deterrence, both specific and general, is a unifying principle informing the appropriate sanction to be imposed.

85    At [101]-[103] of Kazal, in considering the factors relevant to the appropriate sanction for contempt of court, the Full Court observed that deterrence, both specific and general, “remains a dominant theme”. At [104] the Full Court relevantly said:

It follows from the foregoing that it is essential to the due administration of justice that contempt of court, and in particular serious contempt of court, remains relatively rare. Vigilance is required to help ensure contempt remains a rare problem. Whenever there is a real need for deterrence, be it specific or general, that will always be a vitally important consideration in determining the appropriate penalty. …

86    At J[192] the primary judge also recognised this to be the case observing that civil penalties and contempt penalties have the purpose of deterrence in common but that “contempt proceedings involving disobedience of court orders have the additional dimension of the need to uphold and reinforce the efficacy of the administration of justice”.

87    In the circumstances, there was no error in the primary judge’s approach in taking into account, for the purpose of determining the sanction for Ultra Tune’s admitted contempts, the penalty that could be imposed under the Franchising Code. The same approach was adopted by Jagot J in Humane Society International v Kyodo Senapaku Kaisha Ltd (2015) 238 FCR 209 where her Honour observed (at [34]) that the best guide to what might be an appropriate penalty for contempt in that case was to be found in the provisions of the Environment Protection and Biodiversity Conservation Act 1999 (Cth). The Court had previously made an order, which the respondent had breached, restraining the respondent from breaching that Act. At [38] Jagot J observed that “the monetary penalties that could be imposed for each breach of the relevant provisions which must be taken to reflect Parliament’s view of the objective seriousness of the conduct restrained by the 2008 injunctions are substantial…”.

88    Ultra Tune relies on Ferguson v Dallow (No 5) [2021] FCA 698 in support of this ground. In that case Mr Dallow was found guilty of four charges of contempt of court. In determining the sentence to be imposed O’Callaghan J considered whether a contemnor’s prior criminal history, as opposed to any prior convictions for contempt, was a relevant consideration. His Honour determined it was not, concluding at [20]:

… As a general principle, when determining a penalty for contempt, the relevant history of the offender includes, and is limited to, other findings of contempt. In fixing a penalty for contempt the court should take into account only other findings of contempt and should treat as irrelevant the existence of prior convictions of another kind, except for convictions for offences similar to contempt. …

89    However, that does not assist Ultra Tune. Here the primary judge did not take into account a prior criminal history. Rather his Honour had regard to deterrence as a relevant factor and in doing so took into account the penalties that would apply under the Franchising Code. There was no error as alleged in the primary judge’s approach.

90    By ground 4 Ultra Tune contends that the primary judge erred in law in determining the penalty for charge 4 because his Honour was informed by matters expressly recognised as not directly relating to that charge. Ultra Tune refers to J[123] where the primary judge said:

To understand Ultra Tune’s attitude to compliance it is useful to consider a number of facts that do not relate directly to charge 4 but add context to Ultra Tune’s general attitude to compliance with Order 6 of the [March 2019 Orders].

91    Ultra Tune submits that the primary judge erred in considering matters extraneous to charge 4, namely his Honour’s assessment of Ultra Tune’s behaviour in seeking to comply with its obligation to implement a compliance program. Ultra Tune contends that, with the exception of charge 4, no charges were bought in relation to the compliance program and it was not required to, and for the most part therefore did not, address those matters. Ultra Tune submits that, to the extent the primary judge did not confine his assessment to the conduct in relation to charge 4, the exercise of his discretion miscarried.

92    This ground appears to concern the primary judge’s consideration of facts that provided context to the appellant’s general attitude to compliance with the compliance program the subject of Order 6 of the March 2019 Orders. Those facts are set out at J[124]-[135]. They were relevant given Ultra Tune’s submission to the primary judge that “its relevant failures to comply with the [March 2019 Orders] occurred notwithstanding an intention – held at all times – and its best endeavours to comply with the [March 2019 Orders]”.

93    As the ACCC submits Ultra Tune’s attitude to complying with its compliance program (an aspect of which was the subject of charge 4) was relevant to the Court’s assessment of the seriousness of the contempt, Ultra Tune’s culpability, the reason or motive for the contempt, and, to the extent that Ultra Tune’s evidence and submissions sought to minimise the conduct, whether there had been an expression of genuine contrition, all of which are relevant to determining an appropriate punishment for contempt: see Kazal at [101]-[103] citing Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 at [129].

94    Ultra Tune also submits that the primary judge’s formulation of the contempt penalties by reference to an assessment of the lack of deterrent effect of penalties previously imposed for contraventions of the Franchising Code (at J[189]) was in error. It says that, while such matters would be relevant to any prosecution for further contraventions of the Franchising Code, they are not relevant to assessing a penalty for contempt. That submission miscomprehends the primary judge’s observations at J[189] and their subsequent application. As the ACCC submits, read in context, it is clear that the primary judge made the observations at J[189] (see [38] above) in relation to his Honour’s assessment of the penalties for charges 1 to 3. So much is clear from J[195] where, having addressed charges 1 to 3, the primary judge observed that charge 4 “is in a different category to the other three charges”.

95    Grounds 3 and 4 are not made out.

Grounds 5 to 8

96    By grounds 5 to 8 Ultra Tune contends that the primary judge erred in law in determining the penalty for each of charges 1 to 4 in that in each case the penalty was manifestly excessive.

97    Ultra Tune submits that penalties for contempt focus on the objective effect on the conduct of the administration of justice and various subjective factors, including the contemnor’s culpability, antecedents and attitude (including in particular, any apology or other sign of contrition), with deterrence remaining a dominant theme. It observes that instances of serious contempt are relatively rare and there is no suggestion in the present case that the contempt was defiant or contumacious.

98    Ultra Tune submits that it has no history of contempt and entered guilty pleas at the first opportunity, after seeking to purge its contempt in advance of the proceeding, following an invitation to do so by the ACCC. It contends that the primary judge’s conclusion (at J[23]) that it conceded little more than non-compliance and left moral culpability to its employees and agents is inconsistent with the evidence of its managing director, who accepted responsibility for the contempts. Similarly, it neither sought nor gained any benefit from the contempt.

99    Ultra Tune submits that the primary judge’s calculation of the penalties for contempt by reference to the penalty regime under the Franchising Code and its historical compliance failures with the Code was erroneous and materially contributed to the penalties imposed. Ultra Tune contends that the primary judge’s error of principle was in suggesting that penalties for contempt could be greater than if a penalty was being imposed for the same conduct as a civil penalty (referring to J[192]). It says that the primary judge relied on the observations in Hili v The Queen (2010) 242 CLR 520 in support of the proposition that the civil penalty for the conduct would be at least a yardstick for the contempt sanction but Hili does not support that proposition because it was not concerned with contempt but with separate sentences under the same statutory framework.

100    Ultra Tune submits that, having regard to the purpose of penalties for contempt, the penalties were manifestly excessive in the circumstances described at [98] above, that there was no evidence of any harm arising from its conduct and the conduct in question had ceased prior to the commencement of the ACCC’s application.

101    Ultra Tune submits that:

(1)    the penalty of $240,000 imposed for charge 1, for a 10 day delay in publishing a disclosure statement to existing franchisees, was manifestly excessive particularly in circumstances where the primary judge accepted that the contempt arose from a breakdown in communications and was a one-off event;

(2)    the penalty of $300,000 imposed for charge 2, for the approximate seven week delay in preparing the 2019 marketing fund statement (MFS), was manifestly excessive when the penalty is weighed against the period of delay. The primary judge erred in dismissing the relevance of evidence that Ultra Tune understood the importance of filing its MFS by the due date, but relied on the advice of counsel assisting with its preparation to the effect that it was better for the MFS to be late and accurate, rather than early and inaccurate;

(3)    the penalty of $600,000 imposed for charge 3, for the approximate eight month delay in preparing the 2020 MFS, was manifestly excessive in circumstances where Ultra Tune’s compliance officer was not functionally acting in that role due to illness, did not provide a draft until late February 2020, did not provide information sought by the auditor until June 2020, and where the principal criticism of Ultra Tune’s conduct was that it should have realised that the compliance officer was not able to perform the tasks assigned to him and that he should have been replaced; and

(4)    the penalty of $360,000 imposed for charge 4, for failure to ensure compliance reporting to the board on three occasions, was manifestly excessive. Ultra Tune contends that in assessing this charge the primary judge took into account conduct not the subject of any charge and, in circumstances where the primary judge erred in the manner in which he calculated the penalties for charges 1 to 3, the calculation of the penalty for charge 4 by reference to those penalties was necessarily in error.

102    Ultra Tune submits that having regard to the totality principle and the policy objective behind punishment for contempt, the total penalty of $1.5 million was manifestly excessive.

103    The Full Court in Kazal set out the approach to considering whether a penalty is manifestly excessive at [107]-[108]:

107    As Gleeson CJ and Hayne J observed in Dinsdale v The Queen (2000) 202 CLR 321 at [6]:

Manifest inadequacy of sentence, like manifest excess, is a conclusion. A sentence is, or is not, unreasonable or plainly unjust; inadequacy or excess is, or is not, plainly apparent. It is a conclusion which does not depend upon attribution of identified specific error in the reasoning of the sentencing judge and which frequently does not admit of amplification except by stating the respect in which the sentence is inadequate or excessive. It may be inadequate or excessive because the wrong type of sentence has been imposed (for example, custodial rather than non-custodial) or because the sentence imposed is manifestly too long or too short. But to identify the type of error amounts to no more than a statement of the conclusion that has been reached. It is not a statement of reasons for arriving at the conclusion. A Court of Criminal Appeal is not obliged to employ any particular verbal formula so long as the substance of its conclusions and its reasons is made plain. The degree of elaboration that is appropriate or possible will vary from case to case.

108    The ground of manifest excess (in this case as to each of the individual sentences, raised by ground 14), especially when considered without any finding of specific error, requires this Court exercising appellate jurisdiction to approach the purely discretionary aspect of penalty imposed with some caution.

104    The Full Court then referred to the principles in House v The King at 504-5 which, it observed, concerned discretionary decision making in the analogous context of criminal sentencing and relevantly continued at [109]-[111]:

109    In Reckitt at [51]-[53], the following observations were made as to the types of error identified in House v The King and discussed in subsequent recent authority:

51    Error may be specific, in the sense of apparent on the face of the reasons given, such as by application of a wrong principle in reaching the result (which may be evident by the primary judge addressing the wrong question), reaching the result by taking into account something that should not have been considered or by failing to take into account something that should have been considered, or by making a determinative error on the facts in the sense that the factual finding was not properly available to be taken into account in a way that affected the outcome.

52    Alternatively, error may be inferred from a result that cannot have been arrived at without some kind of operative error. The influence of the reasons given for the result arrived at on this process will vary. Reasons are not to be ignored, but nor do they necessarily confine in a rigid or inflexible way the scope of the appellate inquiry. It may be legitimate to have regard to what was said and not said in order to identify how the asserted erroneous result was reached. But for error to be inferred from the result, the result must be one which was not open on the evidence or facts found or agreed.

53    In all cases of specific error, the error must have either caused or materially contributed to the result. An error which has not in some material way affected the outcome will ordinarily result in the appeal court declining to intervene, at least as to the result.

110    The concept of unreasonable or plainly unjust as a basis for finding or inferring error has a flavour akin to Wednesbury unreasonableness insofar as it focuses the mind on an asserted inherently wrong outcome. It is a significant conclusion to reach if it only arises for consideration in the absence of any identified or established overt error.

111    It follows that manifest excess (or inadequacy) can be very difficult to establish without attendant overt error in some respect, except in very clear cases, as the next topic demonstrates. The High Court has made it clear that manifest excess (or inadequacy) is not to be determined as a matter of intuition, but rather is to be revealed by consideration of all the matters relevant to fixing the sentence: Hili v The Queen (2010) 242 CLR 520 (Hili) at [60]. It may be evident when due regard is had to the nature of the contempt and, if available, closely comparable cases: see, by analogy, Hili at [62].

105    One error of principle or specific error identified by Ultra Tune is the subject of ground 3, namely the taking into account of penalties that could have been imposed by the Court had Ultra Tune been successfully prosecuted for breaches of the Franchising Code in respect of the same conduct. We have found that there was no such error.

106    Ultra Tune also submits that the primary judge erred in principle at J[193] in considering that the penalty for contempt could be greater than if a civil penalty was imposed for the same conduct. That followed from his Honour’s observation at J[192] that “[o]rdinarily, all things otherwise being equal, conduct in defiance of court orders will be more serious than the same conduct in defiance of obligations imposed by statute, and can readily be seen to be more serious, because of the overt and preventative nature of orders made by the Court”. There is no error of principle in that approach. It follows from the nature of a contempt of court and the purpose of the power to punish for contempt. Nor in that context did the primary judge misapply Hili. His Honour referred to Hili at [54] where the High Court said:

In Director of Public Prosecutions (Cth) v De La Rosa, Simpson J accurately identified the proper use of information about sentences that have been passed in other cases. As her Honour pointed out, a history of sentencing can establish a range of sentences that have in fact been imposed. That history does not establish that the range is the correct range, or that the upper or lower limits to the range are the correct upper and lower limits. As her Honour said: “Sentencing patterns are, of course, of considerable significance in that they result from the application of the accumulated experience and wisdom of first instance judges and of appellate courts.” But the range of sentences that have been imposed in the past does not fix “the boundaries within which future judges must, or even ought, to sentence”. Past sentences “are no more than historical statements of what has happened in the past. They can, and should, provide guidance to sentencing judges, and to appellate courts, and stand as a yardstick against which to examine a proposed sentence” (emphasis added). When considering past sentences, “it is only by examination of the whole of the circumstances that have given rise to the sentence that ‘unifying principles’ may be discerned”.

    (Footnotes omitted. Emphasis in original.)

107    In referring to Hili at [54] the primary judge was doing no more than explaining his use of the term “yardstick”. That is, he was explaining the proposition that the applicable penalties under the Franchising Code may be a “yardstick” for assessment of an appropriate sanction for the contempt in circumstances where the conduct amounting to a breach of the Franchising Code and constituting the contempt is substantially the same. In doing so, his Honour expressly acknowledged that the statutory penalties were “no more than a useful guide” and could not be a fetter on the Court’s discretion: at J[192].

108    That then leaves the question of whether of themselves the sanctions imposed were unreasonable or plainly unjust or were arrived at with some kind of operative error. Ultra Tune points to several matters in this regard.

109    Ultra Tune says that the primary judge was wrong to find (at J[23]) that it conceded little more than non-compliance and left moral culpability to its employees and agents. At J[23] the primary judge observed that the characterisation of Ultra Tune’s conduct was a central factual dispute to be resolved. His Honour then referred to and made observations about Ultra Tune’s characterisation of its conduct including the observation which Ultra Tune says is inconsistent with the evidence of its managing director. To the extent that is a finding by the primary judge, as the ACCC submits, that finding was open based on other findings made by the primary judge in his detailed analysis of the evidence. That is so despite the evidence of Ultra Tune’s managing director, Peter Sean Buckley, that he was ultimately responsible for the non-compliance.

110    They included that: Mr Buckley’s evidence was “tailored to unfairly shift the blame for the compliance failures to Mr Watts and is reflective of Mr Buckley’s failure to accept the degree of Ultra Tune’s responsibility for the contempt charge that is the subject of charge 3”: at J[177]; and that Mr Buckley’s evidence was unreliable in a number of respects: at J[107], [112], [152], [165] and [177].

111    Ultra Tune says that the fines were in each case manifestly excessive because of what it says was the relatively short period of delay in complying with the March 2019 Orders and, in the case of charges 2 and 3, because of certain evidence which in effect explained the delay. These complaints cavil with the primary judge’s findings and his Honour’s assessment of the penalties without pointing to any specific error.

112    The primary judge undertook a detailed assessment of the evidence and considered the reasons for the failure to comply and Ultra Tune’s overall attitude to compliance. Ultra Tune does not challenge any of the primary judge’s findings of fact nor his Honour’s ultimate finding based on the evidence “that the contempts that were charged were not out of character for Ultra Tune, but in fact a reflection of its corporate character which was insufficiently concerned with, and with effecting, compliance, even when it came to Court orders”: at J[179]. Further, the evidence before the primary judge established that Ultra Tune was a substantial company with total income in the financial years ended 30 June 2020 and 30 June 2021 of $67.8 million and $72.8 million respectively and total profits in those periods of $7.7 million and $8.7 million respectively.

113    Ultra Tune has not established any overt error on the part of the primary judge in determining the fines for the contempts nor that they are otherwise manifestly excessive, taken alone or as a total penalty.

CONCLUSION

114    Ultra Tune has not made out any of its grounds of appeal. It follows that the appeal should be dismissed with costs.

115    We will make orders accordingly.

Associate:

Dated:    28 January 2025

REASONS FOR JUDGMENT

LEE J:

116    I have the considerable benefit of reading in draft the reasons of Markovic and Abraham JJ, who have set out the background to the issues in this appeal, which can be broadly placed into two categories being: (1) Ultra Tune’s contentions as to the want of an endorsement to the March 2019 Orders and the application of the dispensing power; and (2) the primary judge’s findings in relation to the calculation of the penalties for contempt and the penalties themselves.

FIRST CATEGORY ISSUES

117    For the reasons given by Markovic and Abraham JJ, I agree the primary judge did not err in his Honour’s reasoning as to the consequences of the absence of a warning endorsement. I also agree with their Honours observations as to Titan Support Systems Inc v Nguyen (No 2) [2015] FCA 359.

118    But in any event, the point is without substantive merit given the primary judge would have excused compliance. Rules are the servants, not the masters, of justice: Harding v Bourke (2000) 48 NSWLR 598; [2000] NSWCA 60 at [26] per Mason P. That well established proposition takes on greater resonance in a modern system of civil ligation where specific procedural requirements are required to be applied and interpreted consistently with facilitating broader and substantive conceptions of justice, speed and efficiency. Given the primary judge was satisfied that Ultra Tune was aware of the terms of the March 2019 Orders, the need to comply with them and the possibility of an application seeking orders that Ultra Tune was in contempt of Court, the course of dispensation that commended itself to the primary judge would clearly have been open (if his Honour was satisfied the question of dispensation arose).

SECOND CATEGORY ISSUES

119    Ultra Tune’s contention that in determining the penalties for charges 1 to 3 the primary judge erred by having regard to the penalties that could have been imposed by the Court had it been successfully prosecuted for breaches of the Franchising Code in respect of the same conduct is misconceived.

120    The primary judge well appreciated that contempt proceedings are essentially protective in nature and have an importance in supporting and enhancing the integrity of judicial proceedings. His Honour, as Markovic and Abraham JJ explain, further recognised that deterrence, both specific and general, is a unifying principle informing the appropriate sanction to be imposed.

121    I agree there was no error in the primary judge considering, as a relevant factor, the penalty that could be imposed under the Franchising Code in fastening upon an appropriate remedial response having regard to both specific and general deterrence.

122    As to the submission that having regard to the totality principle and the policy objective behind punishment for contempt, the total penalty of $1.5 million was manifestly excessive, this has no merit for the reasons given by Markovic and Abraham JJ.

123    I agree the appeal must be dismissed with costs.

Associate:

Dated:    28 January 2025